S&D – Business Combinations – Part 3

The identification and measurement of acquirer’s identifiable assets, liabilities and contingent liabilities are reassessed. Any excess remaining after reassessment is recognised in income statement immediately

Any remaining excess after reassessment is used to reduce proportionately the fair values assigned to non- current assets (with certain exceptions). Any excess is recognised in the income statement immediately as an extraordinary gain.

Recorded in equity as capital reserve, which is not amortized to income.
However, in case of an amalgamation, the fair value of intangible assets with no active market is reduced to the extend of capital reserve, if any, arising on the amalgamation.

Purchase method­ subsequent adjustments to fair values

Fair values determined on a provisional basis can be adjusted against goodwill within 12 months of the acquisition date. Subsequent adjustments are recorded in income statement unless they are to correct an error.

Similar to IFRS. Once fair value allocation is finalised, no further changes are permitted except for the resolution of known pre­ acquisition contingencies. The adjustments made during the allocation period relating to data for which management was waiting to complete the allocation are recorded against goodwill.

No change is permitted, except for deferred tax asset on carry forward losses or unabsorbed depreciation not recognised on amalgamation. It is permitted to be recognised, if it becomes recognizable by the first annual balance sheet date subsequent to the amalgamation.

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